Netflix Shares Rise as iPad Fans Make Movie-Rental Firm a Star

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Netflix scored an instant hit with the launch of its iPad app, the single most downloaded third-party iPad app so far. Online movie-rental service Netflix (NFLX) has scored an instant hit with its iPad app. IPad fans made it the single most downloaded third-party app for Apple's newest product so far, helping to boost Netflix's stock price to an all-time high Tuesday.

Neither Apple (AAPL) nor Netflix would say how many of the 300,000 iPad buyers (according to Apple) downloaded the free app, but experts say it's one of the most sought-after features so far. Los Gatos, Calif.-based Netflix has seen its shares rise 10% since the iPad's release this weekend. And that's on top of a 125% increase in share price from a year ago.

In Tune With Customers

"Subscribers have been petitioning Netflix to release an iPhone application for some time, but the iPad is a far superior device for viewing feature films," says Jason Ankeny, executive editor of FierceMobileContent, a website that covers mobile news. "So not only is Netflix delivering an application consumers have long demanded, but they're delivering a better user experience than users would ever have enjoyed on a smartphone screen."

The Netflix App for iPad, available at the virtual App Store on the tablet or from iTunes, allows Netflix members to instantly watch an unlimited number of streamed TV episodes and movies. It's a free service for Netflix members, who already pay $8.99 per month or more for their memberships. At the end of last year, Netflix had boasted 12.3 million U.S. subscribers.

Launching the app at the same time as the iPad's release is part of Netflix's strategy to become "ubiquitous" on all Internet-connected devices, including game consoles, digital video recorders and TVs, the company says.

Steve Swasey, vice president of corporate communications for Netflix, calls the company's expansion into Internet-connected devices its latest incarnation and says the last one, in 2007, was when Netflix launched its streaming service, which enables subscribers to watch video directly on their TVs from the Internet instead of waiting for DVDs to arrive in the mail.

Financial StrengthShould Outlast Hype

On Wall Street, many traders are passing off the short-term stock boost as simply part of the iPad hype. But they see the company's consistent earnings -- and its emergence as the only strong player in the subscription-movie field -- as a better indicator of Netflix's success and also the reason behind its longer-term stock price growth. Blockbuster (BBI), which had been a competitor, is facing an uncertain future, while Wal-Mart (WMT) is just getting started in the online movie-rental business.

"There's nobody else in the subscription space essentially offering à la carte videos and well-rounded service," says Andy Hargraves, senior research analyst for Pacific Crest Securities. "Having the iPad app ready to go on Day One shows how Netflix is engaging its customers and give them more reasons to continue to subscribe to the service."
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